Research Insights 5 new developments on the business side of NDC

5 new developments on the business side of NDC

August 2021
Phocuswright Research

New Distribution Capability (NDC), an XML standard launched about 10 years ago by the International Air Transportation Association (IATA), has been a hotly debated topic, especially in the last five years. Designed to enable airline service providers to deliver rich content and ancillaries to their customers, no other air distribution standard has been so overhyped while delivering confusing, often conflicting messages. Is NDC about GDS bypass? Is NDC about normalizing direct and indirect channels? How about giving airlines the ability to merchandise their products and control the quote? Most importantly, is NDC triggering a major financial restructuring of the industry?

Phocuswright has researched and written volumes on NDC (including a 2019 series on Air Distribution), so what else needs to be said? Most discussion is technical in nature, and the questions cited above are highly dependent on a specific airline's use of NDC. But developments over the last year, as outlined in the latest Phocuswright research report The Business Side of NDC, have reinforced a clear message regarding the economics of air travel distribution: As Bob Dylan once professed, "The times they are a-changin'."

Here are 5 new developments on the business side of NDC, with a specific concentration on the corporate travel market.

Follow the Money

At this point in NDC development, the airlines' underlying goals center more around pricing control than the desire to lower GDS fees.

Incentives vs. Blind Segment Awards

The pursuit of a so-called "private channel" has been underway for many years. The private channel relationship involves four entities - the corporation, the TMC, the airline and the GDS - in bilateral agreements. It is this private channel concept that now permeates NDC channels, eliminating incentives tied to segment production.

The Complicated Path Forward

All three GDSs are making progress on new, multi-source desktops, but to date, there is limited capability for implementing mixing of NDC and non-NDC content. Specific examples include:

  • Amadeus/Air France/KLM Agreement
  • United Airlines Announcement with SAP Concur
  • Delta Airlines and Sabre Agreement

Stakeholder Impact

The most impacted:

  • The Corporation (for corporate travel)
  • The TMC, OTA or leisure travel agency
  • The GDS
  • The Airline

The Future of Airline Distribution Economics

Most parts of the value chain that depend on GDS aggregation technology have been pleased with the turnaround in attitude toward NDC in the last four years. But as previously highlighted, the GDSs are still lagging in support capabilities, and the United/Concur and Air France-KLM/Amadeus announcements illustrate how workarounds are still the standard.

What is the central goal of NDC, and will it ultimately be useful to the corporate customer? Touching upon some recent developments, this article primarily focuses on the business side of NDC, with a specific concentration on the corporate travel market. Download the full report here.

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